Bellamy's organic movement hits Tasmania

Bellamy's (ASX: BAL) has made a $5.5 million investment to assist Tassie farmers in transitioning to organic practices.

The infant formula producer has signed a deal with global dairy giant Fonterra to help Tasmanian farmers switch to organic practices, in an effort to increase the local supply.

Bellamy's will make an initial $5.5 million investment in processing assets, with the companies aiming to cover farmers' costs of converting to organic processes.

As a result the company will take the first 20 million litres of milk per year from the resulting pool of or organic milk produced by Tasmanian organic farmers, and will have the first right over additional volumes.

Additionally, Bellamy's has struck a multi-year agreement with an affiliate of Victoria-based Australian Consolidated Milk (ACM) to secure access to that supplier's organic milk product.

ACM previously announced it will construct a new milk processing plant in Girgarre, Victoria, during 2018 that is capable of processing organic milk simultaneously with conventional milk.

CEO of Bellamy's Andrew Cohen says the company is excited to be able to support Tasmanian farmers with their transition to organic.

"This is an exciting step forward for Bellamy's and the Australian organic dairy industry," says Cohen.

"We hope to improve outcomes for Australian dairy farmers, support the Tasmanian dairy industry, and at the same time take greater control of our supply-chain and cost structure."

"We believe the rising demand for our brand and high quality, premium organic infant formula in Australia, China and emerging Asia can become an important and value-added platform for Australian farmers."

Bellamy's shares jumped 6.8 per cent in early trade on Thursday, building on the previous day's 4.5 per cent increase.

Shares in Bellamy's are up 4.97 per cent to $17.75 per share at 10.49am AEST.